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SoftBank’s super-fast 5G network isn’t very useful just yet

SoftBank Corp’s fifth-generation wireless service in Japan is living up to the hype in at least one respect – Internet speeds that are blazingly fast even by the standards of one of the most connected countries in the world.

The carrier’s month-old 5G network topped out at 1.1 gigabits per second for downloads and about 30 megabits for uploads in tests carried out by Bloomberg News in Tokyo. Speeds of this kind, far surpassing typical wired broadband connections, have previously been possible only by pushing a fibre optic cable directly into a user’s home. But there are significant pieces still missing and preventing mass adoption: coverage is severely limited for now, there’s little in the way of appealing content to capitalise on all that extra bandwidth and mobile data plans have yet to be revised to account for the much-increased consumption that 5G portends.

SoftBank and local rivals KDDI Corp and NTT Docomo Inc all launched their 5G offerings late last month in a handful of metropolitan areas around the country, while newcomer Rakuten Inc has targeted June for launch. The Japanese telcos and their counterparts in South Korea and China have pressed ahead with deployment of next-generation networks despite global coronavirus woes. But 5G services touting high speeds and low latency are still out of reach for the majority of people eager for bandwidth to stream movies and telework as they shelter at home.

SoftBank shares were mostly unchanged in morning trading in Tokyo on April 28.

The coverage in Japan is still so thin that the three major carriers have all resorted to posting addresses of the exact locations where early adopters can get 5G bars. In Bloomberg’s own limited test of SoftBank’s network, the best reception was inside its store in Tokyo’s posh shopping district of Ginza, and the signal quickly dropped off to nothing about a block away. While SoftBank plans to expand the service to larger pockets of Tokyo and other big cities later this year, the company doesn’t expect to reach 90% of the population until March 2022 at the latest.

Part of the challenge is that 5G networks have to be more dense than their predecessors. Their signals typically use higher-frequency spectrum, starting with 3.6 gigahertz in Japan, which allows for faster communication speeds at the expense of reach. Building out a 5G network at such frequency necessitates more networking infrastructure to achieve coverage. That’s more of an issue for sprawling places like the United States than densely populated Japan, said Kirk Boodry, an analyst at Redex Holdings who writes for Smartkarma.

“The coverage is still going to be spotty for a while, ” said Boodry. “And since all of the operators upgraded to 5G at the same time, there is no advantage. The primary selling point is just speed.”

Even when it can be had, it’s not yet clear what that much bandwidth is actually good for. The handful of augmented and virtual reality experiences that come preinstalled on SoftBank’s 5G phones work just as well with a basic WiFi connection. They lean heavily on teenage idols, letting users view performances by pop bands like AKB48 from multiple angles or in 3-D. There’s also an app for streaming basketball games of the recently formed domestic professional league, though all the matches have been cancelled because of the virus outbreak. SoftBank is also launching a cloud gaming service in collaboration with Nvidia Corp.

The carrier, serving as the reliable revenue stream underpinning Masayoshi Son’s SoftBank Group Corp, is offering its 5G service as an add-on to existing plans for 1,000 yen (RM40.70) per month. Subscribers who sign up by Aug 31 will get it for free for two years. But all usage is counted toward the customer’s data cap, which could mean burning through the 50GB monthly allowance in mere minutes.

The operators are counting on the faster speeds nudging users to pay more for bigger data plans, but history suggests otherwise. SoftBank’s average revenue per user, 4,440 yen (RM180.90) in the most recent quarter, has grown less than 10% since the company introduced the iPhone 3G more than a decade ago. 5G isn’t likely to bring much revenue upside either, Boodry said.

“Carriers have basically been trading capacity for revenue, ” he said. “Operators thought that with 3G they could offer a lot of services and charge more, but there wasn’t all that much price elasticity.”

In 1993, at the dawn of mobile telephony, AT&T Inc aired a series of TV commercials titled “You Will” that imagined future services like video calls, movie streaming and in-car navigation. Network operators have long been able to foresee, but not capitalise on, the major trends made possible by their technology. They have invested billions to build the infrastructure that made it possible for companies like Apple Inc, Netflix Inc and Alphabet Inc’s Google to reap the benefits, earning the moniker of “dumb pipes” in the process.

SoftBank’s Son is pulling out all the stops to avoid repeating that history. Last year he engineered a complex deal to combine SoftBank’s Yahoo Japan Internet business with the country’s biggest messenger Line Corp. The idea is to create a national champion capable of competing more effectively against global giants like Google and Tencent Holdings Ltd. Son has dubbed the strategy “beyond carrier”.

SoftBank’s US$100bil (RM437bil) Vision Fund has also bet big on the Japanese entrepreneur’s vision for a future centred on artificial intelligence and connected devices, investing in about 90 businesses ranging from ride sharing, co-working and robotics to agriculture, cancer detection and autonomous driving. SoftBank has also paid US$32bil (RM139.8bil) for sole ownership of ARM Holdings Plc, a dominant supplier of semiconductor designs for mobile phones.

Son’s investments, whether they eventually pay off or not, reflect a prevailing technological zeitgeist that places increased importance on data. Recent breakthroughs in deep-learning algorithms, which vastly improved the ability of machines to perceive the world, have been fueled in part by large amounts of data generated by Internet users. Examples include Google’s algorithmic Pixel smartphone cameras and smart voice assistants like Inc’s Alexa. 5G is likely to open the floodgates for a fresh torrent of data from real-world devices that range from tiny wearable sensors to autonomous vehicles.

“We don’t know what the really popular applications will be, ” Boodry said. “It’s not just 5G, but also the shrinking cost of processing power. These trends are happening concurrently. Put them together and you have a lot of unpredictable synergies.” – Bloomberg

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